Choosing Chapter 13 for Your 2026 Benefit

right away upon filing, through the automatic stay. You're behind on your mortgage and wish to keep your homeYour income is above the Colorado median and you do not pass the Chapter 7 suggests testYou have non-exempt equity you wish to protect by paying its value into a strategy rather of losing the assetYou have financial obligations that survive Chapter 7 (particular taxes, some domestic support financial obligations) that you require structured time to payYou've filed Chapter 7 too recently to file again (see timing rules below)The methods test under 11 U.S.C.

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Here's how it works in plain terms: The U.S. Trustee Program publishes average household earnings figures by family size, upgraded every April and November using Census Bureau data. If your average monthly earnings over the previous six months, annualized, falls at or listed below Colorado's median for your family size, you pass the ways test immediately and may file Chapter 7.

Many above-median filers still get approved for Chapter 7 after these reductions. or you might still have options depending on the kind of debt you bring (the means test only applies to filers whose financial obligations are primarily customer debts). Since the mean earnings figures and IRS expense standards alter twice a year, the specific numbers that applied when a pal or relative submitted might not use to your case today.

Chapter 13 isn't available to everybody despite earnings there are statutory debt ceilings under 11 U.S.C. 109(e). Since the most recent inflation adjustment (efficient April 1, 2025, through March 31, 2028), the limits are separate for protected and unsecured debt, in the low 7 figures integrated. There is active, bipartisan legislation pending in Congress that would raise and streamline these limitations into a single combined threshold worth viewing if you're near the present ceiling, especially if a big home loan is what's pushing you over.

How to Filing for Chapter 7 in 2026

This is typically the choosing aspect for Colorado filers. Colorado's exemption statutes safeguard a set quantity of equity in your home, car, tools of trade, pension, and personal effects. If your equity in a possession surpasses the exemption, the trustee can sell it and pay you the exempt portion but for the large bulk of filers with average equity levels, whatever is protected and absolutely nothing is sold.

This is often why higher-equity property owners or business owners choose Chapter 13 even when they may technically pass the Chapter 7 indicates test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus ongoing trustee charge)Frequently paid up front or soon after filingFrequently paid through the strategy over timeStays ten years from filingStays 7 years from filingUnsecured debt without any significant possessions at riskSaving a home, treating defaults, above-median income Chapter 13 Chapter 7 You normally must wait 8 years for another Chapter 7 discharge, however may receive Chapter 13 quicker (timing rules are technical and case-specific) Chapter 13, to treat the default and keep the car Frequently Chapter 13, though eligibility depends upon the "routine earnings" requirement Chapter 13's co-debtor stay uses defense Chapter 7 does notI spent years administering cases as the Trustee -seeing firsthand which choices held up and which ones backfired.

Filing the wrong chapter, or filing correctly however with a preventable mistake, can indicate losing property you might have kept or paying years longer than essential. If you're weighing Chapter 7 vs.

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Stop Wage Garnishment Through 2026 Bankruptcy

Yes, in most cases a lot of can convert your transform from Chapter 13 to Chapter 7 if your circumstances changeSituations alter to certain restrictions and constraints approval.

It depends on your home earnings compared to Colorado's current mean figures for your family size, plus enabled expenditure deductions if you're above mean. These figures change twice a year, so an accurate response requires inspecting the chart in impact on your filing date. Yes. Filing either Chapter 7 or Chapter 13 sets off the automatic stay, which immediately stops most wage garnishments, collection calls, and lawsuits.

Chapter 13 deals court-enforced security that personal debt settlement does not provide, but it's a longer dedication. This short article is for general informative functions only and does not constitute legal advice. Bankruptcy law is fact-specific, and results depend upon your private situations. Contact our office to discuss your scenario straight.